FEDERAL COURT OF AUSTRALIA El Greco (Australia) Pty Ltd v Mediterranean Shipping Company SA [2003] FCA 747 EL GRECO (AUSTRALIA) PTY LTD and JOHN THEADORAKAPOULOS v MEDITERRANEAN SHIPPING COMPANY SA Q 71 of 2001 KIEFEL J BRISBANE 17 JULY 2003 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q71 OF 2001 BETWEEN: EL GRECO (AUSTRALIA) PTY LTD (ACN 075 512 855) FIRST APPLICANT JOHN THEADORAKAPOULOS SECOND APPLICANT AND: MEDITERRANEAN SHIPPING COMPANY SA RESPONDENT JUDGE: KIEFEL J DATE OF ORDER: 17 JULY 2003 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. There be judgment for the second applicant in the sum of $63,570 together with interest from 17 April 2000. 2. The respondent pay the second applicant's costs up to 28 November 2003. 3. The second applicant pay the respondent's costs of the proceeding thereafter including the costs of the hearing today. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q71 OF 2001 BETWEEN: EL GRECO (AUSTRALIA) PTY LTD (ACN 075 512 855) FIRST APPLICANT JOHN THEADORAKAPOULOS SECOND APPLICANT AND: MEDITERRANEAN SHIPPING COMPANY SA RESPONDENT JUDGE: KIEFEL J DATE: 17 JULY 2003 PLACE: BRISBANE REASONS FOR JUDGMENT 1 The first issue remaining in these proceedings is whether the costs recovered by the applicant should be the subject of reduction under O 62 r 36A(1). The purpose of the rule is to discourage the bringing of actions which could be brought in lower courts and less expensively. It is not appropriate to be applied here. The case involved important and reasonably complex questions and regardless of quantum it was proper to be brought in this Court. Quite properly, the respondents did not really press a submission to the contrary. 2 The second and larger issue is the order which should be made with respect to costs given the offers of compromise made by the respondent on 9 October 2002 and 27 November 2002 which were both substantially in excess of the sum recovered. In between those dates an affidavit of Mr Peter Cocks as to the value of the posters making up the cargo was filed and it proved to be critical to the outcome where the second applicant recovers a sum for judgment but nowhere near the amount claimed. The trial date was about a week after the second offer. 3 Order 23 r 11(5) provides for a regime where an offer is made by a respondent in such circumstances. It incorporates the orders set out in sub-rule (6)(c) and (d) as appropriate unless the Court otherwise orders. It therefore proposes a different outcome than that an applicant should have its costs because it receives something by way of judgement and renders an applicant liable to pay costs incurred subsequent to the rejection of an offer. Sub-rule (5) imports those orders as appropriate, implicitly with respect to offers made at times earlier than the day before trial or later which is the concern of sub-rule (6). In any event, here the offer most relevant to consider is that made after the receipt of Mr Cocks' affidavit and it was made quite close to trial. 4 The rule provides for an order for costs on a party and party basis. The applicant however seeks an order for costs on an indemnity basis. The additional factors to make this out are said to essentially arise from the conduct of the applicant or the insurer who brought these proceedings by way of subrogation. It is said that it was plainly unreasonable on its part to reject the offer and to press on and in the course of doing so, inflict further costs on the respondent. 5 In cases where offers of compromise are made by applicants respondents must make choices and inevitably take risks. The rule to an extent holds them to account for the choice. The question is whether there was something out of the ordinary here and the focus is on Mr Cocks' affidavit and what it informed the insurer of. As I have said, the insurer who brought the proceedings had that material prior to the receipt and rejection of the second offer. It certainly ought to have alerted the insurer to there being an issue about value and that the evidence which it intended to bring would be contradicted. On the other hand the insurer had evidence which I consider it was reasonable to suppose might still be acted upon, namely, the sale price between Mr Petrogiannakis and Mr Theadorakapoulos. 6 At this point there was not the evidence of what Mr Petrogiannakis had himself earlier paid for the goods which might, to a much greater extent, have alerted the insurer to the problem. The insurer might have been wrong not to obtain further evidence. Orders for indemnity costs are not however made merely because of errors in judgment in litigation. The reality may be that there was a level of distraction with what were perceived to be the greater issues in the trial, namely, liability and limitation of liability. I do not think however it could be said that the insurer's position on value was so completely without foundation that it could be seen to have acted capriciously in failing to accept the offer. 7 In these circumstances, I do not propose to order costs on an indemnity basis. The orders will be that: 1. There be judgment for the second applicant in the sum of $63,570 together with interest from 17 April 2000. 2. The respondent pay the second applicant's costs up to 28 November 2003. 3. The second applicant to pay the respondent's costs of the proceeding thereafter including the costs of the hearing today. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel . Associate: Dated: 21 July 2003 Counsel for the Applicants: Mr B Rayment QC and Mr M McHugh Solicitor for the Applicants: Murrell Stephenson Counsel for the Respondent: Mr A Sullivan QC and Mr G Diehm Solicitor for the Respondent: Blake Dawson Waldron Dates of Hearing: 17 July 2003 Date of Judgment: 17 July 2003